Big city mayors back review of Alberta's flat tax on income

By Darcy Henton and James Wood, Calgary HeraldThe mayors of Alberta’s two biggest cities say it is time for the province to re-examine its 10 per cent flat tax on income as Premier Jim Prentice acknowledges his cash-strapped government is looking closely at the levy.Calgary Mayor Naheed Nenshi said Thursday he agreed wholeheartedly with Prentice’s concern that for the flat tax is “one of the toughest forms of taxation in this country” for the working poor.“You need to do some fiddling when you’ve got a flat tax system with the low-end of the market or it is tremendously unfair to people,” Nenshi said in an interview at McDougall Centre.“So he’s exactly right on this and the question is: Do you improve the flat tax or do you move to a more progressive taxation system? And I think that’s a really good question for people to address.”Edmonton Mayor Don Iveson, who attended a government announcement on municipal legislation with Nenshi, went further as he backed a move to a progressive income tax.He applauded Prentice’s openness to considering changes to Alberta’s revenue mix to lessen the province’s dependence on energy revenues and make up for a massive budget shortfall.“Progressive income taxes have public support, more public support than maybe other tools, because people understand there’s a fundamental fairness there,” said Ivison. “We also have the opportunity to look there at some relief for low-income working poor people.”The Progressive Conservative government is grappling with what it says is a likely $500-million deficit for the fiscal year ending March 31, and potentially a $7-billion hole in next year’s budget because of the plunge in oil prices.In 2013, the government said increasing the flat tax to 11 per cent would generate $930 million, while introducing a second tax rate on income over $250,000 — boosting it to 14 per cent — would generate $1.2 billion.The advocacy group Public Interest Alberta says the province could reap $2-billion annually by raising the tax rate to 13 per cent on those who make between $100,000 and $150,000, and 15 per cent on those above that income.Prentice told reporters Thursday he wants to hear from Albertans about all the options the government has as it moves to deal with its financial crunch and “unsustainable” fiscal structure.“We’ve obviously been studying all aspects of deficits, of the government revenue streams and how we can cut public expenditures. In that discussion, we’ve looked very closely at the flat tax,” said Prentice, adding he stands by his concern about the tax unduly hitting the working poor.“I think we need to be mindful of that, especially as we go forward in what is going to be a difficult year, probably a couple of difficult years. These are going to be some of the people hardest hit.”Prentice said that with the current price turndown in oil, the government can’t just “ride this out.” Projections from government and industry are that oil will average $62 US a barrel next year.“This is a different market circumstance than we’ve seen in other commodity price cycles. Prices are not going to bounce back,” he added.The Alberta government has in the past defended the 10 per cent tax rate as progressive because of a basic personal credit that makes income under $18,000 tax-free.Both the Liberals and NDP have called for a return to a progressive tax system. Liberal finance critic Kent Hehr said Thursday that ditching the flat tax on income is “a no-brainer.”“The flat tax is dumb,” he said. “It hasn’t allowed us to have predictable, sustainable revenue in this province. A progressive tax would give us some ability to do that.”NDP Leader Rachel Notley said Prentice appears to be sending up daily trial balloons ahead of a likely spring election.“It’s not anything anybody can take to the bank because this guy is changing his mind on every position on a daily basis,” she said.“If they do actually move ahead in getting rid of the flat tax in a meaningful way … that would be progress.”But Wildrose finance critic Drew Barnes said it’s premature to talk about any changes to the taxation system until the government gets its spending under control.“We’re absolutely committed to no tax increases,” Barnes said.“We’ve made a firm commitment against a provincial sales tax, against reinstating health-care premiums, against raising taxes whatsoever.”jwood@calgaryherald.comdhenton@calgaryherald.comRead the article on the Calgary Herald's website